THE COST OF COMPLIANCE or

NON-COMPLIANCE

Atty. Mary Joyce M. Sasan

Director, ABCOMP

Chief Compliance & Corp. Gov. Officer, UBP

2016 TOAP Summit

28 June 2016 1

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1a : the act or process of complying to a desire,

demand, proposal, or regimen or to coercion

b : conformity in fulfilling official requirements

2: a disposition to yield to others

3: the ability of an object to yield elastically when a

force is applied : FLEXIBILITY

SOURCE: WWW.MERRIAM-WEBSTER.COM/DICTIONARY/COMPLIANCE

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2 October 1997 – BSP Circular No. 145 was

issued. It required a compliance system and a

compliance officer.

11 January 2008 – BSP Circular No. 598 was

issued. It made mandatory an appointment of a

CCO depending on the total resources of a bank.

I. Milestones

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6 February 2012 – BSP Circular No. 747 was

issued. It amended the entirety of Sec. X180 of

the Manual of Regulations for Banks.

28 May 2013 – BSP Memo. No. 2013-023 was

issued. It provided the BSP Compliance Rating

System.

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CAPITAL – minimum capital requirements;

stress test limits for real estate exposures;

domestic systemically important banks; leverage

ratio, and; liquidity coverage ratio (see BSP

Circular Nos. 781, 839, 856, 881, 904 & 905).

II. Compliance Impact

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GOVERNANCE – defines qualifications, fitness &

suitability of board candidates, senior

management and certain officers; mandate to

Board of Directors to oversee all aspects of

operations and compliance; strengthening of

control function units (ARC), and; corporate

governance trainings (see BSP Circular No. 749,

SEC Memo. Circ. No. 2-2015).

II. Compliance Impact

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TECHNOLOGY – IT risk management; EMV

compliance for cards; 3DES for ATMs;

outsourcing; infrastructure integrity, and;

security of information (see BSP Circular Nos.

808 & 859, Memo. No. 2014-047).

II. Compliance Impact

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OPERATIONS – lending activities (SBL, DOSRI);

cross-selling functions; mandatory agri-agra and

mSME credit allocations; related party

transactions; Credit Information System, and;

Financial Consumer Protection (see BSP

Circular Nos. 855, 857, 895, & 914; RA Nos. 9501,

9510 & 10000).

II. Compliance Impact

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TRANSACTIONS – anti-money laundering &

terrorist financing; cross-border transactions via

remittances or internet banking, and; FATCA (see

BSP Circular No. 706, RA Nos. 9160, 9194, 10167,

10168 & 10365).

II. Compliance Impact

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• Set the tone at the top. Good governance =

good compliance.

• Have an effective ARC in place.

• Get the right people with the right

qualifications, skills & experience.

III. How do we comply?

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• Establish effective compliance partnerships

with your institution, regulators and other

stakeholders.

• Be refreshed: regulations + laws + trends +

technology + training.

III. How do we comply?

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• CAMELS/ROCA Rating

• Specialized Ratings (IT Risk, Trust, AML)

• Local or Foreign Recognition or Awards

• Strong and stable perception and confidence

from Stakeholders/Public

IV. Fruits of Compliance

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1. Corrective Actions

- BSP Directives

- Letter of Commitment (LOC)

V. Ramifications of Non-Compliance

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2. Sanctions

a. On the Financial Institution (FI)

- restrictions on activities & privileges

- suspension of authorities, privileges

& other activities

- divestment and/or unwinding

- monetary sanctions (penalties/fines)

V. Ramifications of Non-Compliance

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2. Sanctions

b. On Directors and Officers

- reprimand

- restriction on compensation & benefits

- divestment, suspension

- disqualification, removal

- monetary penalties/fines

V. Ramifications of Non-Compliance

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3. Other Supervisory Actions

- initiation into the Prompt Corrective

Action (PCA) framework

- issuance of a cease & desist order

(CDO) against the FI/Directors/Officers

- conservatorship

- placement under receivership

V. Ramifications of Non-Compliance

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VI. Other Ramifications

- exposure to legal, regulatory or

reputational risks

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